Our thoughts on Grab’s 2023 Q2 earnings

On Wednesday, Grab released its Q2 2023 results. Overall the company made good continuous progress towards profitability, with steady growth in GMV for both its delivery and mobility segments.

As usual here are some of our thoughts about the current set of financials.

For clear and in-depth comparison with other tech platforms, do refer to our “Apples to Apples” and “Apples to Apples 2.0” reports:

1. After SEA Group’s 30% share price drop and GoTo’s GTV declines, Grab’s Q2 results finally brought some good news for tech platforms in the region. Investors responded positively, sending Grab’s share price 10.6% higher during the 1st full day trading after the release.

2. As we mentioned a few times previously, Grab’s delivery and mobility businesses are all about execution and constant optimisation of operational efficiency, and Grab seems to be making constant progress in their efforts to enhance profitability. The group seems to be very confident about the progress,  bringing forward its target of group adjusted ebitda breakeven a quarter earlier to Q3 2023.

Group CEO Anthony Tan shared in the earnings call that “There’s no secret, no silver bullet, just lots of fundamental little, little improvements. And we’ve talked about hundreds of little, but very important initiatives.”

3. Interestingly, after four quarters of slight declines amid post-pandemic reopenings, Grab’s GMV for deliveries started growing again on both QoQ and YoY terms. In Q2, GMV for deliveries grew 9.77% QoQ. Grab seems confident that this trend of growth in GMV will continue into the next quarter, indicating in the earnings presentation that its July GMV was growing both MoM and YoY.

It’s interesting to note that Grab’s GMV for delivery is at an all-time high, while GoTo’s on-demand GTV shrank by 3.6% QoQ in Q2. Does this mean that GoTo is losing market share?

We mentioned in the Food Delivery Platforms in Southeast Asia report that the platforms were starting to use subscriptions to increase stickiness and value of higher end customers. It seems that GrabUnlimited subscription programme is making some traction, contributing to 1/3 of Grab’s Deliveries GMV according to the company. We do not know for sure whether this also contributed to Grab’s all time high quarterly GMV as Grab does not include a breakdown of its GMV or revenue from subscription fee in its financial statements. 

4. In mobility, just like how GoTo has its “Mode Hemat,” Grab is offering more budget-friendly ride-hailing choices such as Grab pooling. This allows Grab to expand its customer base (beyond its current premium ones) – the MTU increased from 33.3 million in Q1 to 34.9 million in Q2. This might also be a strategic move to create a moat against aggressive low-cost competitors like Maxim and InDrive.

5. Grab recently announced that it plans to acquire 100% ownership of Trans-cab, Singapore’s 3rd largest licensed taxi operator. This would likely help alleviate the structural supply issue in the Singapore market – amongst the largest in Southeast Asia in transaction value. The deal is being reviewed by Singapore’s anti-competition watchdog, but we do not see how this will change the competitive dynamics as ComfortDelGro, the largest taxi operator in Singapore, also runs a significant ride hailing operation. 

6. For financial services, the on-grab transactions as a percentage of total TPV increased from 62.96% in Q1 to 66.03% in Q2. This suggests what Grab conveyed last year on its investor day to focus on platform payment (as opposed to third party offline merchants) is continuing.

7. We are also seeing some movement in Grabs digital bank GXS Bank. In July, Grab opened up the GXS Savings Account to all eligible individuals in Singapore, and increased the maximum deposit amount for individual savings accounts to S$75,000 from S$5,000 prior. (This move suggests that the Monetary Authority of Singapore (MAS) may have lifted the SG$50 million cap on aggregate deposits for each digital bank, though MAS has not confirmed this).

There might be some positive impact on Grab’s Q3 results.

8. Overall, incentives increased by 7.57% QoQ, bucking the trend of incentives decline over the last few quarters. The incentives as a percentage of GMV, however, remained constant – suggesting the competition was not heating up.

9. Grab’s cash position still remains quite healthy – with reduced burn, Grab has further extended its runway to 47 quarters (when looking at gross cash) and 45 quarters (for net cash). This is more than enough runway for the company to achieve positive free cash flow.

10. Does anyone remember Shopee food, once an aggressive disruptor in 2022??

11. On that note, Grab must be really glad they did not go into ecommerce. Ecommerce platforms in the region, such as Shopee and Tokopedia, are facing strong competition from TikTok Shop – as we have highlighted in our The TikTok Shop Playbook report released this week.

12. Did anyone notice that Grab used a female rider on the cover of their earnings presentation this quarter? First time in 2 years.

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In the coming weeks, we will also be issuing an updated version of Apples to Apples (yes A2A 3.0) as every platform company covered (Sea, Grab, GoTo, Uber, Doordash, Delivery Hero, Zomato, Meituan) has released their Q2 results. Stay tuned!